Property Ownership – Joint owners and distribution of profits

In my blog entitled “Property Ownership – the basics explained” I set out the differences between properties held as joint tenants and tenants in common, click here to read my previous blog.  The shares of each party effectively refer to the share of the proceeds of the sale that they will receive on disposal of the property – joint tenants will receive equal shares, whereas tenants in common may receive unequal shares.  However, there are situations where the property is not sold, but it does generate income which is then to be divided.

In most cases, the parties will sit down together before profits are generated and agree how these will be divided.  However, this does not always happen (it is probably less likely to in the case of a family business, rather than a purely commercial enterprise).

The case of Rashid v (1) Munir, (2) Khalil (3) Rashid and others [2018] EWHC 1258 dealt with this point.  It concerned four brothers who held a number of properties as joint tenants having inherited their father’s business empire (of which the properties were a major part).  The Second Defendant ran the business, and the Claimant was employed in it.  The Claimant decided to sever the joint tenancies, rather upsetting the Defendants in the process, and was promptly sacked (his Employment Tribunal claim had already been settled with a substantial payment to the Claimant). The issue which left to be determined was the share of the Claimant’s beneficial interest in the properties, and his claim to a share of rental payments which had been received.

The case gained a certain amount of attention because the judges both at first instance and on appeal were scathing about the witness evidence on both sides. On appeal, Mr Justice Turner stated that “each witness is attempting to outdo each other in a rich display of competitive dishonesty”.  He referred to the business as “fiscally clandestine” and stated that the operations and profitability of the company were “but lightly touched upon in the tax returns of the defendants.”  Both the judge at first instance and on appeal referred the matter to the DPP.  However, none of this is to suggest that the judge at either stage got the law wrong.

In relation to the beneficial share of the properties, the Courts held that equity follows the law in the absence of any credible evidence to suggest otherwise.  Where parties have been joint tenants, they must be expected to understand that they will own an equal share of the property following severance of the joint tenancy.

In relation to the distribution of profits generated by the properties, the judge at first instance refused to award anything to the Claimant on the grounds that that was not the common intention of the parties.  The Claimant appealed but was unsuccessful – the judge upholding the decision that there was no common intention that he would receive a share.

Whilst a co-owner is normally entitled to claim a share of rental profits in proportion to his share of the interest, ultimately the Court has to determine the common intention of the parties in relation to payments.  In the instant case, the judge determined that there was no common intention that profits be shared – evidenced by the fact that the rents had not previously been distributed in accordance with the beneficial interests (he called the arrangements ‘unorthodox’).  The judge was clearly extremely unhappy about the standard of evidence provided, and the conduct of the parties, but that does not change the position regarding the law.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*